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Subprime Lending in the City of Cleveland and Cuyahoga County

The effects of the current economic crisis have had devastating effects on nearly every area of the country. States such as Arizona, California, Florida, and Nevada, where “exotic” loans such as option-ARMs and interest-only mortgages were common, have faced unprecedented foreclosure rates and declines in property values. While the decline in property values in many Rust Belt cities have not been as great, the economic situation in many of these cities is in many ways equally, if not more, desperate. Having suffered through the decline in industrial manufacturing and resulting population loss, many of these cities never experienced the huge increase in home prices that had occurred on the coasts. An examination of the rise in subprime lending in the City of Cleveland and surrounding Cuyahoga County, Ohio, provides a useful example of what many of these older industrial cities have faced over the past fifteen years and of the challenges that the current crisis presents.

Cleveland reached its peak in population in 1950, when it was the seventh largest city in the nation with a population of 914,808. However, beginning in the 1950s, Clevelanders began to leave the city, first to the inner ring suburbs, and eventually to regions further and further away. By 2000, Cleveland’s population was 478,403, and by 2005-2007, it was estimated to be down to 405,014, just 44% of its peak in 1950.2 In some Cleveland neighborhoods, the decline has been profound. For example, the population of the Fairfax neighborhood on the east side of Cleveland dropped from 39,380 in 1950 to 7,352 in 2000, an 81.3% decline.

The population declines in the adjacent neighborhoods (which were between 93% and 97% African American in 2000) were nearly as high, with the Central neighborhood experiencing a population decrease of 82.6% compared to 1950, the Hough neighborhood a 75.1% decrease, and the Kinsman neighborhood a 73.6% decrease.